If something isn’t broken, it doesn’t make sense to try to fix it. And yet some are eager to start tinkering with our nation’s patent system, even though the system is working very well.
Protecting patents are a core value of Americans and consistent with the idea that investors have a property right to their inventions. According to Adam Mossoff who wrote back in 2013 at the Foundation for Economic Education (FEE) that “in the early American republic, courts secured patents as fundamental property rights.”
Judges treated patents the same as real estate and our Founders granted special protections for inventions. Now comes some politicians who are claiming to streamline and improve the patent process, yet they are really empowering bad actors who are infringing on other’s intellectual property rights to make more cash.
The most recent attempt at “reform” is through the “STRONGER Patent Act,” sponsored by Democratic Sen. Chris Coons of Delaware. The bill pretends to reform the patent system. What it would really do, though, is gut the Patent Office’s Inter Partes Review, a rare but important process that helps protect against patent fraud.
You may not have heard much about this, because patents, while important, tend to be rather obscure. However, they are critical to American manufacturing.
The United States Patent and Trademark Office (USPTO or Office) is an agency of the U.S. Department of Commerce. The role of the USPTO is to grant patents for the protection of inventions and to register trademarks.
A questionable patent can cause years of legal maneuvering and can stop the process while the lawyers fight it out. An Inter Partes Review (IPR), created by an act of Congress in 2011, provides a clear, simple process to review whether a patent should have been issued.
IPR begins with a petition to a legal panel. After that, the panel responds. The Patent Trial and Appeal Board must then decide whether to institute an IPR. After that, the patent holder gets another chance to state its case, before there is a full hearing and an opportunity for an appeal. And it is worth noting that the IPR’s findings are upheld in 90% of cases appealed to federal courts. That’s an incredible track record.
The goal of the most recent Congressional reform was to “improve patent quality and restore confidence in the presumption of validity that comes with issued patents,” and it has worked. As Josh Landau writes on the blog Patent Progress, over the last five years, the IPR process has saved companies more than $2 billion in legal costs, even as it has helped companies swat down false patent claims.
What sort of cases result in an IPR? Often, frivolous patent claims. For example, “real estate agents in Texas fended off a company’s demands for royalty payments for a feature of many websites: the ability to show prospective home buyers where local schools, parks and grocery stores are,” the New York Times reported. Patent judges have also blocked “an attempt to extract royalties from small businesses using off-the-shelf scanners to scan documents to email,” and protected patents’ ability to access generic drugs when a pharma company tried to extend a patent. That result was good for everyone.
The process, while important, is rarely used. Fewer than 1,500 patents are challenged each year through the IPR process, out of some 3 million patents in place nationwide. Still, the system is working for everyone -- except the patent trolls. That’s why those trolls are pressing for change, and calling it “reform.”
Because of the current process, “Companies no longer have to pay ransom so the threat of lawsuits over dubious royalty payments — filed by aggressive litigants known as trolls — will go away,” The New York Times explains. “Consumers no longer have to pay for bogus intellectual property covering, say, a method to take their pills.”
But that could all go away. The proposed The STRONGER Patent Act would make IPR worthless, and thus lower the quality of American patents, leaving our country weaker against foreign innovators.
IPR has been very successful in weeding out bad patents. Let’s keep it in place, and keep the patent trolls under wraps.
Dr. Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.
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